Investment Trusts outperform equivalent Funds

Laura Suter
15 July 2019

•       Investment trusts outperform the equivalent fund 75% of the time
•       Trusts are cheaper 60% of the time
•       Beware volatility: trusts are more volatile due to gearing

Laura Suter, personal finance analyst at investment platform AJ Bell, comments:

“There’s been lots of talk recently about whether investment trusts or funds are the better vehicle for investors, so we decided to crunch the numbers on comparable portfolios. There are a number of fund managers who run both a fund and an investment trust to a similar strategy, meaning we can compare the two on cost, performance and volatility to see which comes up trumps.

“Comparing these ‘dual managers’ we found that in 75% of cases the investment trust outperformed the fund, on a total return basis over a 10-year period. What’s more, in 60% of the pairings the trust was the cheaper vehicle, with a lower ongoing charges figure. On average the funds in the group cost 0.97% while the trusts cost 0.91%. 

“However, investors don’t get this extra performance for free and they have to be prepared for a bumpier ride. Investment trusts have the ability to borrow money, or ‘gear’, meaning that when they are doing well their returns can be supersized, but when their investments are falling these losses could be amplified. This shows in the figures, and a whopping 90% of the time the trust is more volatile than the equivalent fund. 

“One of the more famous dual managers is Nick Train, who runs both the £7.1bn Lindsell Train UK Equity fund and the £1.8bn Finsbury Growth & Income trust. The fees on the funds are almost identical (as are the top 10 holdings), but the trust’s performance has outstripped the fund, returning 498.6% over 10 years compared to 432.8% for the fund. However, over time the trust has been slightly more volatile, likely due to the gearing that the trust has, which is currently low at 1.2%.

“Another dual manager pairing is Alexander Darwall, running the Jupiter European fund and the Jupiter European Opportunities trust, although he will step down from running the fund at the end of this year and is planning to set up his own firm. This is an example where the trust is cheaper than the fund, with an OCF of 0.9% compared to 1.02% for the fund. Over 10 years the performance difference is stark, with Jupiter European returning 364% compared to 567.9% for the trust, albeit for far higher volatility. 

“One pairing that bucks the trend on price is Alex Wright’s Fidelity Special Situations and Fidelity Special Values investment trust, where the latter is pricier than the fund, costing 1.05% compared to 0.91%. Despite this potential fee drag, the trust has outperformed the fund by almost 50% more over 10 years, returning 268.5% compared to 187.8%, although Wright hasn’t run the fund for that entire time.”

Which has outperformed over 10 years?

Percentage

Trust

75%

Fund

25%

 

Which is cheaper?

Percentage

Trust

60%

Fund

40%

 

 

 

 

 

 

Which is more volatile?

Percentage*

Trust

88%

Fund

13%

*Numbers don’t equal 100% due to rounding

Fund manager

Fund name

Investment Trust name

Which is cheaper?

Fund - 10-year performance

Trust - 10-year performance

Which outperformed over 10 years?

Which is more volatile?

Adam Avigdori, David Goldman

BlackRock UK Income D Acc

BlackRock Income and Growth Ord

Fund

153.34%

168.36%

Trust

Fund

Alex Wright

Fidelity Special Situations W Acc

Fidelity Special Values Ord

Fund

187.77%

268.51%

Trust

Trust

Alexander Darwall

Jupiter European I Acc

Jupiter European Opportunities Ord

Trust

364.02%

567.89%

Trust

Trust

Andrew Brough

Schroder UK Mid 250 Z Acc

Schroder UK Mid Cap Ord

Trust

203.09%

276.27%

Trust

Trust

Andrew Rose

Schroder Tokyo Z Acc

Schroder Japan Growth Ord

Fund

158.58%

205.77%

Trust

Trust

Austin Forey

JPM Emerging Markets B Net Acc

JPMorgan Emerging Markets Ord

Trust

161.69%

199.47%

Trust

Trust

Ben Ritchie

Aberdeen UK Equity Income I Acc

Dunedin Income Growth Ord

Trust

163.17%

189.25%

Trust

Trust

Ben Rogoff, Nick Evans

Polar Capital Global Tech I Inc

Polar Capital Technology Ord

Trust

587.83%

661.14%

Trust

Fund

Chern-Yeh Kwok

Aberdeen Japan Equity I

Aberdeen Japan Ord

Fund

175.03%

204.48%

Trust

Trust

Ciaran Mallon

IP Income & Growth Z Acc

Invesco Income Growth Ord

Trust

171.69%

180.73%

Trust

Trust

Douglas Brodie

Baillie Gifford Global Discovery B Acc

Edinburgh Worldwide Ord

Fund

536.50%

472.00%

Fund

Trust

Ed Kuczma

BGF Latin American D4 GBP

BlackRock Latin American Ord

Trust

80.07%

65.70%

Fund

Trust

Evy Hambro, Olivia Markham

BGF World Mining D4 GBP

BlackRock World Mining Trust plc

Trust

16.51%

46.35%

Trust

Trust

Ewan Markson-Brown, Roderick Snell

Baillie Gifford Pacific B Acc

Pacific Horizon Ord

Fund

269.97%

218.49%

Fund

Trust

Francesco Conte, Edward Greaves

JPM Europe Smaller Companies B Acc

JPMorgan European Smaller Comp Ord

Fund

269.40%

306.82%

Trust

Trust

Francis Brooke, Hugo Ure

Troy Trojan Income O Acc

Troy Income & Growth Ord

Trust

186.07%

273.47%

Trust

Trust

Georgina Brittain, Katen Patel

JPM UK Smaller Companies B Acc

JPMorgan Smaller Companies Ord

Fund

281.82%

377.24%

Trust

Trust

Harry Nimmo

SLI UK Smaller Companies Inst Acc

Standard Life UK Smaller Co. Ord

Fund

404.73%

488.14%

Trust

Trust

Hugh Young

Aberdeen Global Asn Smllr Coms X Acc GBP

Aberdeen Standard Asia Focus Ord

Fund

218.65%

393.87%

Trust

Trust

Hugh Young

Aberdeen Asia Pacific Equity I

Aberdeen New Dawn Ord

Trust

183.31%

211.02%

Trust

Trust

Hugh Young

Aberdeen Global Indian Equity X Acc GBP

Aberdeen New India Ord

Trust

256.23%

241.50%

Fund

Trust

John Bennett

Janus Henderson European Focus I Acc

Henderson European Focus Trust Ord

Trust

226.35%

240.83%

Trust

Trust

Jonathan Brown

IP UK Smaller Companies Eq Z Acc

Invesco Perpetual UK Smaller Ord

Fund

350.29%

472.87%

Trust

Trust

Mark Barnett

Invesco Income UK Z Acc

Edinburgh Investment

Trust

129.54%

184.79%

Trust

Trust

Mark Barnett

IP UK Strategic Income Z Acc

Perpetual Income & Growth Ord

Trust

137.61%

144.89%

Trust

Trust

Matthew Brett

Baillie Gifford Japanese B Acc

Baillie Gifford Japan Ord

Fund

262.52%

457.77%

Trust

Trust

Michael Kerley

Janus Henderson Asian Div Inc UT I Acc

Henderson Far East Income Ord

Fund

194.10%

154.67%

Fund

Trust

Neil Hermon

Janus Henderson UK Smaller Coms I Acc

Henderson Smaller Companies Ord

Trust

413.34%

575.28%

Trust

Trust

Nick Mustoe

IP Global Equity Income Z Acc

Invesco Perp Select Glo Eq Inc Ord

Trust

242.75%

216.42%

Fund

Fund

Nick Train

LF Lindsell Train UK Equity Acc

Finsbury Growth & Income Ord

Trust

432.75%

498.59%

Trust

Trust

Oleg Biryulyov, Habib Saikaly

JPM Russia C (acc) USD

JPMorgan Russian Securities Ord

Trust

103.87%

175.14%

Trust

Trust

Ollie Beckett

Janus Henderson European Smr Coms I Acc

TR European Growth Ord

Trust

364.45%

246.11%

Fund

Trust

Peter Hewitt

BMO Multi Man Invest Trust Fd C Net Acc

BMO Managed Portfolio Growth Ord

Fund

194.30%

185.71%

Fund

Fund

Praveen Kumar

Baillie Gifford Japan Small Co B Acc

Baillie Gifford Shin Nippon Ord

Fund

482.38%

789.22%

Trust

Trust

Richard Newbery, Alistair Whyte, Euan Macdonald, Keith Muir, Chris Watt, Peter Shaw, Jeremy Hall

Aberforth UK Small Companies Acc

Aberforth Smaller Companies Ord

Trust

233.72%

274.80%

Trust

Trust

Samuel Morse

Fidelity European Acc

Fidelity European Values Ord

Trust

191.01%

239.16%

Trust

Trust

Shoichi Mizusawa, Nicholas Weindling

JPM Japan A Net Acc

JPMorgan Japanese Ord

Trust

235.63%

278.12%

Trust

Fund

Simon Gergel

Allianz UK Equity Income C Inc

Merchants Trust Ord

Trust

154.69%

195.48%

Trust

Trust

Steve Davies

Jupiter UK Growth I Acc

Jupiter UK Growth Ord

Fund

151.97%

144.83%

Fund

Trust

Thomas Moore

SLI UK Equity Income Uncons Plat 1 Acc

Aberdeen Standard Equity Income Ord

Trust

206.16%

165.39%

Fund

Trust

Source: AIC/AJ Bell/FE. Data is on a total return basis.

Laura Suter
Personal Finance Analyst
Laura Suter is personal finance analyst at AJ Bell. She is a multi-award winning former financial journalist, having specialised in investments. Laura joined AJ Bell from the Daily Telegraph, where she was investment editor. She has previously worked for adviser publications Money Marketing and Money Management, and has worked for an investment publication in New York. She has a degree in Journalism Studies from University of Sheffield.
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